The research has been on financial inclusion policy of the CBN and socio-economic growth of small and medium scale enterprises in Nigeria. The main objective is thus to empirically investigate the link between financial inclusion and the performance of small and medium scale enterprises in Nigeria. The study covered the period between the 1980 - 2017.the ordinary least squares were used to analyze the result. The Result revealed that demand deposit has positive and significant relationship with the output of small and medium scale enterprises in Nigeria. The credit to the private sector has a significant and positive impact in the output of SME in Nigeria. The money supply has a positive and significant impact on the output of small and medium scale enterprises in Nigeria. The liquidity ratio has a positive and significant impact on the output of small and medium scale enterprises in Nigeria. The level of financial deepening has positive and significant impact on the level of economic growth in Nigeria the result recommends amongst others rather expansion in the credit to the private sector which encompasses the small and medium scale enterprises in Nigeria. Will increase the output of the SME and promote socio-economic outcomes for small and medium scale enterprises.






1.1 Background to the Study

Every economy is based and determines by the strength of financial industry. The financial industry include all institutions that their operations of monetary transactions. According to Okpara, Onoh, Ogbonna and Iheanacho (2018), financial sector plays important role in economic growth and development through the process of financial intermediation. In case of understanding, Ramji (2009), explains that financial operations refers to delivery of financial services to the people either Customers or non- Customers through direct or indirect operations.

According to World Bank (2009), financial sector is the brain of the economy and that when it functions properly. It allocates resources to the most productive and efficient uses. Financial institutions are there to mobilized deposits and encourage savings culture among individuals, corporate bodies, group of people e.t.c. Sanusi (2009), explained that a well-functioning financial system are able to mobilize household savings, allocates resources efficiently, diversify risk, enhance the flow of liquidity, reduce information asymmetry and transaction cost and provide an alternative to raising funds through individual savings and retained earnings.

Muhammad and Lean (2011) pointed out the significant role of financial sector to the economic development to mean a well-established and developed financial system increases the efficiency and effectiveness of financial institutions and bosst the innovations in the services system. It also helps the advancement of technology, reduction of information cost and profitability of investment.

There is a nexus between financial industry and the entire economic activities in Nigeria.  Apparently, financial sectors perform numerous functions in the suitability of the economy. According to Okodua and Ewetan (2013), financial system stand in any economy to performs a number of functions. There ranges from mobilization of savings, allocation of financial resources, diversification risk, and facilitation of trade and capital formation. Akinlo and Egbetunde (2010), specifically categorized the functions of financial sector in an economy to include a critical element in growth process while the second has negative impact on the economy. This position is true because the rise and fall of any economy determine the rise and fall of the economy.

Jalhon (2009), argued that by mobilizing savings from surplus unit to the deficit unit who are desirous for productivity investment, capital inflow are facilitated the financial markets not only stimulate investment in both physical and human resources built also the channel savings to more productive uses by collecting and analyzing information about investment opportunities.

These contributions led to the introduction of financial inclusion. Before now the sophisticated technologies in the financial sector and cost for establishing financial institution enfranchised many Nigerians from carry out financial transactions. On the other hand, the regulators of the economy such as Central Bank of Nigeria (CBN) and others cannot vividly predict the financial status of the economic holistically. It is upon this gap that CBN introduced financial inclusion in Nigeria.

According to United Nations (2016) defined financial inclusion to mean a timely delivery of financial services to the disadvantaged sectors of the society. Enhancing Financial Innovation and Access (EFInA) (2013) define financial inclusion as the provision of a broad range of high quality financial products such as savings, credit, insurance, payments and pensions, which are relevant, appropriate and affordable for the entire adult population especially the low income segments of the economy.

In Nigeria, there are many reasons why unbanked and lack of access to financial services especially the rural dwellers prevail. The result of the EFInA to Financial Services in Nigeria 2012 survey showed that 34.9 million adults representing 39.7% of the adult population were financial excluded. This means that only 28.6 million adults were banked representing 32.5% of the adult population (EFInA, 2013).

Financial Inclusion is critical to the attainment of poverty reduction, removal of barriers to economic participation of rural dwellers, women, youths and those at the bottom of poverty.

It is also focused on improving financial education for rural dwellers. Financial Inclusion will help pave way for sustainable economic growth by providing financial services to individuals and communities that traditionally have limited or no access to the formal financial services as evidenced in Nigerian rural dwellers. Meanwhile, this study is meant to evaluate the sustainability of financial inclusion on rural dwellers in Nigeria.

According to Fadum (2014), in the Nigerian context, financial inclusion is achieved when adults have easy access to a broad range of formal financial services that meet their needs and are provided at affordable cost. CBN(2012),there are five basic pillars of financial inclusion. These are:

v Access to a full suite of financial services, including credit, savings, insurance, and payments

v Services must be convenient, affordable, suitable, provided with dignity and client protection

v Services must be provided to everyone who can use financial service including both excluded and under-served populations, with special attention to rural, persons with disabilities, ethnic minorities, and other often-excluded groups

v In a diverse and competitive marketplace consisting of a range of financial service providers, supported by robust financial infrastructure and a clear regulatory framework

v Clients financial literacy and capability to promote best use of financial services (Gardeva and Rhyne, 2011; CBN, 2012).

Provision of affordable financial services to owners of small, medium and large enterprises allows rural dwellers to earn an independent income and contribute financially to their households and communities. This allows families to have access to a decent standard of living which will reduce the level of poverty in country.

People with access to savings accounts or simple informal savings technologies are more likely to increase consumption, productivity and income, increase investment in preventive health, and reduce vulnerability to illness and other unexpected events (Dupas and Robinson 2009). Likewise, increase access to microcredit enhances investment and entrepreneurship for households with existing businesses (Karlan and Zinman, 2010).  To facilitate financial inclusion, access to four key services are essential – transaction banking, savings, credit and insurance (World Bank, 2005).

According to Nwanne (2015), the enterprise is at the heart of sustainable development and the necessary impetus must be given to the creation and development of rural dwellers enterprises. In recent years most jobs have been created by small and medium sized enterprises. Affirmative action programmes in self-employment, entrepreneurial skills development and small and medium enterprise development are strongly recommended because they are significant for at least three related reasons: they represent a potentially viable alternative to wage employment; sometimes such employment better enables rural dwellers to combine work with their reproductive role especially family responsibilities; and because the successful development of rural dwellers owned enterprises will determine whether the informal sector is a sector of last resort.

SMEs encourage self-reliance because they mostly use locally sourced raw materials. They have also been noted for their capability of promoting inclusive growth which is noted to be the end-product of economic growth in many countries. Although, economic growth is considered to be a necessity for any economy of the world, however, recently, people have found that inclusive growth is more of a necessity for a sustainable economy than economic growth. The notion is that, growth that cannot reduce inequality nor reduce unemployment is nothing more than mere increase in figures.

According to Hadiza and Olofin (2017), the major argument behind inclusive growth is that, if the poor is getting benefits without participating in the growth process, inequality will keep on widening. This then informs policy makers focusing on reducing inequality and the need to quantify the trade-offs between alternative policies and growth strategies. Thus, the general consensus is that, growth is good, sustained high growth is better, but sustained high growth with inclusive growth is the best of all since it is considered to be a cursor to poverty reduction which supposed to be the end-product of economic growth.

1.2 Statement of Problem

SMEs have been the major sector for economy development. Within this coverage are young and innovative entrepreneurs that out-number large scale businesses in Nigeria. According to Hadiza and Olofin (2017), SMEs importance on any economy cannot be underrated; various obstacles have been identified as hindering factors to the growth and competitiveness of SMEs in Nigeria. Among these obstacles is financial exclusion. Financial exclusion is the inability of the SMEs to access funds by the business owners as well as individual consumers at the required time.

According to World Bank (2005), there are four vital areas of financial exclusion. They include savings, credit, transaction banking, and insurance. Financial exclusion can occur due to inability to access basic financial services because of the following: lack of information, low income, social exclusion, illiteracy, sparse population in rural and inaccessible areas with poor infrastructure and lack of physical access, non-availability of informal credit, administrative bureaucracy, high charges and penalties among others. People that are mostly financially excluded are farmers, landless labourers, unorganized sector, urban slum dwellers, migrants, ethnic minorities and women.

According to Adelaja (2003) it was found that access to institutional finance has always constituted a pandemic problem for SMEs‟ development in Nigeria. In an attempt to rescue SMEs from financial challenge, Nigerian government has created various institutions, schemes and programmes such as the Nigerian Industrial Development Bank in 1962, Small Scale Industries Credit Scheme in 1971, the Nigerian Bank for Commerce and Industry in1973 and the Bank of Industry in 2001.

However, this strategy cannot be effective because SMEs in Nigeria continue to be disenfranchised to the benefits of financial activities. The new financial inclusion is seen to be effective now because of the number of progress witness since 2012 in the banking sector especially specialized banks like Bank of Industrial, Agricultural banks, and other financing policies of the commercial banks which target at providing services to SMEs through agent banking, mobile banking (USSD CODE), online banking, ATMs in rural sites and host of others.

Therefore, this study seeks to examine the impact of financial inclusion to socio economic growth of SMEs in Nigeria using Delta State as study environment. The findings from the study shall close in knowledge gap as regard to the objectives of the study.

1.3 Objective of the Study

The main objective of this study is to examine the importance and contributions of financial inclusion of Central Bank of Nigeria (CBN) on socio economic growth of SMEs in Nigeria. The followings are the specific objectives:

  1. To determine the coverage of CBN financial inclusion policy.
  2. To examine the contributions of financial inclusion on socio economic growth of SMEs in Nigeria.
  3. To measure the achievements of financial inclusion on socio economic growth of SMEs in Nigeria.
  4. To ascertain the challenges facing the implementation of financial inclusion among financial institutions

1.4 Research Hypotheses

  1. There is no significant relationship between CBN financial inclusion policy and socio economic growth of SMEs.
  2. There is no significant improvement of financial inclusion on SMEs growth

Hence, the difference is while financial inclusion has been label success, the impact has not stirred the needed growth of SMEs in Nigeria

1.5 Scope of the Study

The scope of the study is limited to financial inclusion policy of CBN on socio economic growth of SMEs in Nigeria with focus to SMEs in Delta State. Two major cities in Delta State were the primary focus and these are Warri and Asaba. The choice for these cities is business of the high number of SMEs. The study’s periodic coverage is for one year which is from January to December 2018.


1.7 Significance of the Study

This study seeks to provide knowledge. There is not enough research on the subject. The few ones focused on the entire country as their study environment. This essence of this study with focus to Delta State is because of the importance of the two growing economically in the total development of the country.

Therefore, the study shall determine the coverage of CBN financial inclusion policy; the contributions of financial inclusion on socio economic growth of SMEs in Delta State; the achievements of financial inclusion on socio economic growth of SMEs in Delta State and the challenges facing the implementation of financial inclusion among financial institutions.

The findings of the study are helpful to economic planners and financial regulatory bodies to understand if the scope of the policy is holistic enough. Also, it will help SMEs to utilize the policy for business expansion and development and contribution to the country GDP.



1.7 Definition of terms

Financial Inclusion: Financial inclusion as the provision of a broad range of high quality financial products such as savings, credit, insurance, payments and pensions, which are relevant, appropriate and affordable for the entire adult population especially the low income segments of the economy.

Central Bank of Nigeria: This is the highest financial regulatory body that survives financial activities of commercial banks, micro finance banks and other financial institutions.

Socio Economic: Socio economic refers to A distinct supplemental usage describes social economics as "a discipline studying the reciprocal relationship between economic science on the one hand and social philosophyethics, and human dignity on the other" toward social reconstruction and improvement or as also emphasizing multidisciplinary methods from such fields as sociologyhistory, and political science.

Growth and Development: Growth and development are the point for measure the status of a country’s economic activities.

Financial Institution: Financial institution is the financial system that operates in the financial industry by dealing with deposit and saving and giving out loans to the people and SMEs.

SMEs: these are small and medium scale business which their annual turn is between 1m to 50m. There are regarded as grassroots business or the retail business.